A two-level approach is presented to solve the problem of 'optimal' sh
ort-term (one day) scheduling of reactive power controllers in this pa
per. The entire problem is decomposed into two Levels: the master and
the slave Levels. The master Level deals with minimization of the depr
eciation cost of compensators and EHV transformer taps in order to red
uce the control action for compensators and EHV transformer taps while
satisfying operating constraints. The slave Level treats minimization
of capitalized MU losses while satisfying system security constraints
. The slave level also treats OLTCs and determines scheduling of the g
enerator voltages. These two levels interact through linear constraint
s in the iteration process. A practical 265-bus system, namely Taiwan
Power System, are used to serve as a sample to show the applicability
of the presented approach.